I'm upgrading from feisty to hardy in vserver and it has the same
problem.
Setting up udev (117-8ubuntu0.2) ...
/etc/iftab does not exist to convert
Removing any system startup links for /etc/init.d/finish ...
mknod: `/lib/udev/devices/ppp': Operation not permitted
dpkg: error processing udev (--configure):
subprocess post-installation script returned error exit status 1
** Changed in: udev (Ubuntu)
Status: Fix Released => Confirmed
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udev fails to install in a vserver due to /lib/udev/devices/ppp - operation not
permitted
https://bugs.launchpad.net/bugs/144685
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